Can You Trade Successfully & Money Be Made Based on Price Moves Taking Place Just Prior To The Close?
This United Kingdom commodity futures trading research was done using data from the Chicago Mercantile Exchange (CME) Live Cattle market over a 4-1/2 month period. The trade results probably would be similar using data from most other futures markets but we have not verified that to be correct.
Using our commodity Price Quotes Machine we made a quick note of the price exactly 30-minutes prior to the market close each trading day. On the next day we noted the opening price, the days high/low range above or below the open, and closing price. Days were ignored if the 30-minute price and the subsequent closing prices were the same.
During the testing time-period a total of 61-trading days had chart up-trends the last 30-minutes, and 78-days had chart down-trends during the last 30-minutes of the trading day.
Next Days Close Higher 62% of Time
Next Days Close Lower 56% of Time
The results were bullish for the next day if the price trend was up during the last 30-minutes, a total of 38 out of 61 times, or 62% of the time.
If the last 30-minute trend was down, the next day was likely to be bearish 44 out of 78 times, more than 1/2 the time (to be precise 56% of the time).
This test has some good statistical validity. It seems to us a good profit potential commodities futures trading system could be developed based on this technical research.
Unfortunately, the percentage numbers may not be quite strong enough to make any potential commodities futures trading systems too reliable or extremely profitable, or significantly reliable. However, with more extensive futures markets research involving a number of diversified trading markets, and using good money management skills combined with a tested and sound trading plan, any potential trading systems based on this research could in fact be nicely profitable with reasonable low-risk.
Additional research needs to be done on this subject to decide on the reliability of any potential commodity trading system or trading methodology based on this trade concept.
Is it Possible to Make Futures Trading Profits Based On
The Price Difference Between Closing and Settlement Prices?
Were you aware the official commodity exchange settlement price and the actual closing price are frequently different and quite often are modified time after the actual trading stops?
Some of our CTCN Trading Club Members may not be aware of that fact. However, if you have a quote machine I am sure you have noticed this regular occurrence.
The market stops trading and perhaps Soybeans last tick at exactly 679. Usually, about 10 to 20-minutes or so AFTER all trading stops, the Commodity Futures Exchange gives the day's so called settlement price, of say 678-1/2.
Official Closing Price Not Necessarily Based
on The Last Actual Trade That Took Place
Thus, even though the last actual trade was at 679, the official closing price will be 678-1/2 that will be published in newspapers and market data vendors.
One more real-time trading example is T-Bonds last trading at say 113-04, but about 15-minutes AFTER trading stops the Exchange reports they settled at 113-03.
Why does this pattern happen? The exact reason is a little unclear. However, it seems to be related to the fact the Floor Traders (known as locals) and the Brokers do settlements between themselves after the actual close of public trading.
It is Possible to Make Regular Money
Based on Closing VS Settlement Price Differences?
Is there a way profits could be made based on this common settlement procedure? Quite possibly! We tested this concept in the U.S. Live Cattle futures market and discovered the following:
A total of 30 closes were observed where the final settlement price was higher than the last tick actual trade price. On 22-days the next day's closing price was bullish, or 73% of the time!
A total of 28 closes took place that resulted in the days final settlement being lower than the day's last tick. On 21-days the next day's close was lower, or 75% of the time!
Our technical market analysis is far from complete. Additional futures markets (including U.K. Futures) and a greater time period need to be analyzed and additional futures markets need to be researched. However, there appears to be a good chance that consistent money could be made trading by using these commodity-futures-trading observations and trading concepts.